Assume the Following Information for a Bank Quoting on Spot

question 41

Multiple Choice

Assume the following information for a bank quoting on spot exchange rates:
$$\begin{array} { l l r } \text { Exchange rate of Singapore dollar in U.S. S } & = & \$ .60 \\\text { Exchange rate of pound in U.S. S } & = & \$ 1.50 \\\text { Exchange rate of pound in Singapore dollars } & = & \text { S } \$ 2.6\end{array}$$
Based on the information given, as you and others perform triangular arbitrage, what should logically happen to the spot exchange rates?

• A) The Singapore dollar value in U.S. dollars should appreciate, the pound value in U.S. dollars should appreciate, and the pound value in Singapore dollars should depreciate.
• B) The Singapore dollar value in U.S. dollars should depreciate, the pound value in U.S. dollars should appreciate, and the pound value in Singapore dollars should depreciate.
• C) The Singapore dollar value in U.S. dollars should depreciate, the pound value in U.S. dollars should appreciate, and the pound value in Singapore dollars should appreciate.
• D) The Singapore dollar value in U.S. dollars should appreciate, the pound value in U.S. dollars should depreciate, and the pound value in Singapore dollars should appreciate.

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